60,000 euros in savings, a car, your own home and then support on top - the extreme examples of the citizens' income critics sound drastic. But does the government really want to help the long-term unemployed too much? Many of the regulations now under attack have been in place since the pandemic began.
The Bundestag has made a decision, and for millions of people in Germany this decision was urgent: From January 1st, the governing coalition wants to pay out the new citizen’s allowance to the long-term unemployed and workers who have been topping up their low wages with Hartz IV: a significantly higher basic security for Single people, for example, increased from almost 450 euros to 502 euros.
This part of the law is not disputed between Ampel and Union, because ultimately the future standard rate is primarily adjusted to the rate of inflation. The inflation rate was 10.4 percent in October, only slightly lower in the previous months. The approximately 50 euros more in the wallet of a single person, around 180 euros more for a family of four, will only help to mitigate the current loss of purchasing power, which is causing many concerns.
With the decision in Parliament, there could just be enough time for the changeover to start the new year with the new standard rates - if it weren't for the decision in the Bundesrat in mid-November. He has to agree to the law, and that could go wrong for the traffic light if state governments with Union participation such as Bavaria, North Rhine-Westphalia, Schleswig-Holstein and Baden-Württemberg block citizen income.
This is exactly what the CDU and CSU are promising. Both disagree with a number of factors surrounding the new citizens' income. They see no significant improvement in the adjustments made by the Ministry of Labor after the first salvo of criticism and warn that in its current form the law will "quite likely not find a majority in the Bundesrat next week," as Union faction leader Friedrich Merz said.
Criticism of citizen income comes not only from the Union, but also from the Federal Court of Auditors, the Paritätisches Gesamtverband, the district council, various economic institutes and employers' associations. The impression is reinforced that everyone who is involved in any way with the complex of "work and social affairs" in Germany has substantial complaints about the new law. right?
The labor ministers of the four federal states already mentioned, in which the Union participates in the government, primarily criticize the planned waiting period. It states that those in need can receive benefits for two years without having their assets and housing situation checked and touched. Unless the applicants identify their assets as "substantial" themselves. "It cannot be that someone stays unemployed for up to two and a half years and receives the so-called citizen's benefit and practically hardly has to make their own contribution to returning to the labor market. It doesn't work that way," said Friedrich Merz in " Early Start" by ntv.
According to traffic light understanding, the assets of a single person are significant from an amount of 60,000 euros. A family or community of needs may have a further 30,000 euros in savings for each additional member, without this being included in the assessment of need. It is considered a "sparing asset". A family of four could have savings of up to 150,000 euros and a property they live in, and after losing their job and receiving unemployment benefits, they would still receive citizen benefits for two years, amounting to around 1700 euros plus housing and heating costs.
"The regulations in the draft law will lead to a largely unconditional basic income within the first two years," the Confederation of German Employers' Associations sums up and, as can be expected, has something against this development.
The Association of Towns and Municipalities also rejects the two-year waiting period. In his opinion, not checking whether the rent payment of a recipient of basic income is reasonable during this time means that the state has to spend more money on covering accommodation costs. In addition, it sets "false incentives". The waiting periods invited you to take full advantage of the benefits for the first two years.
However, the truth is that this waiting period already exists as a regulation, dating back to the height of the corona pandemic. At that time, the grand coalition introduced them, among other things, to better protect the assets of the self-employed, which they often use as pension provisions.
The traffic light wants to perpetuate this regulation in the new law. A side aspect: Even someone who was already benefiting from the waiting period during the pandemic could extend it by another two years with the citizen’s allowance. In extreme cases, benefits can be drawn for five years without touching assets or an inhabited property.
How many extreme cases of this kind will come to the job center cannot be predicted exactly. Studies indicate that the long-term unemployed with significant assets make up about one to two percent of the total. In 2021, this was 1.03 million people. There is no question that it will be more expensive for the job centers to pay the full rental costs for two years without checking whether they are appropriate.
The case studies that have been circulating on the Internet and in the media in recent weeks, suggesting that long-term unemployed people can make ends meet better than working, soon turned out to be incorrectly calculated. For example, state support for low earners, such as several hundred euros in housing benefit, was omitted from the calculations. With such benefits and the increase in the minimum wage to 12 euros, Jürgen Schupp, labor and social expert at the German Institute for Economic Research (DIW), sees the wage gap requirement still guaranteed. Anyone who works has more money at their disposal than someone who receives citizen benefits.
In his view, the positive effects of the waiting period predominate: Applicants do not first have to "make themselves poor" by using up significant savings before they get the chance to receive state support in a difficult situation. The otherwise frequent double burden of having to look for a new job and a new, cheaper apartment at the same time is also avoided. If the rent is secured for two years, the focus can be entirely on finding a job.
But do the two years of parental leave tempt you to make yourself too comfortable thanks to the basic security? Especially since in the first six months, called "trust period", there is not even an obligation to actively help with the job search. This regulation is not only seen by the Union as a gateway for abuse. In fact, such an all-round offer also enables those who would no longer be part of the group of those entitled to help after the end of the waiting period to obtain it. This facilitates abuse, criticism on this point is justified.
However, social scientist Schupp would also like to have the positive effects of waiting and trust periods offset here. Because far more often than cases of abuse, it happens that beneficiaries are ashamed to go to the office at all. 42 percent of those surveyed said so in a survey of long-term unemployed people in North Rhine-Westphalia. Job loss and the threat of social decline cause self-confidence to sink to the lowest level.
According to Schupp, it helps if the job center first creates a friendly atmosphere "instead of the first letter immediately giving instructions on which form of abuse will be punished and in what way".
The Union's assumption that waiting periods create "disincentives to continue receiving benefits" cannot be dismissed out of hand. But incentives do not necessarily mean that large numbers of people follow them. The statistics of the Federal Employment Agency show that more than 200,000 long-term unemployed in 2021 had found a job in the first labor market after two years at the latest. They were therefore successful in finding a job during the maternity leave.
The rate of these successful departures even rose from 1.2 to 1.8 percent within one year, although the circumstances for Hartz IV recipients had improved with the introduction of the waiting period in 2020. This speaks against the fact that a climate without mistrust in the job center must inevitably lead to many benefit recipients becoming permanently dependent on the state.
Changes in the long-term unemployment rate over the past ten years can be clearly attributed to economic development. If this was positive and the labor market was correspondingly open, more long-term unemployed people found their way back into the labor market.
In order to punish abuse of the social system and to ensure that the recipients of aid are trying to return to the labor market, the traffic light wants to retain the principle of promoting and demanding in the case of citizen income. Up to 30 percent of the support amount can be canceled if the recipient is not willing to actively participate in the job search.
The Union complains that the severity of the sanctions falls short of what the Federal Constitutional Court allowed as applicable in 2019. Karlsruhe had declared the much stricter Hartz IV sanctions to be incompatible with the Basic Law. However, the traffic light does not exhaust the leeway left by the constitutional judges.
The Federal Court of Auditors criticizes this because, in its opinion, "audit findings show that the preventive effect of sanctions already has a positive effect on the cooperation between those entitled to benefits and the job center". However, it remains unclear from which tests these findings originate.
No empiricism of the effect of sanctions is known from labor and social research. They were introduced in 2005 as part of the Hartz IV reforms because it was simply assumed and hoped that they would have a positive effect. While many social researchers reject sanctions on subsistence level as "degrading", the survey of long-term unemployed people from North Rhine-Westphalia says that only a slim majority, 53 percent, would advocate the complete abolition of sanctions. 22 percent are undecided and another 22 percent want to keep sanctions in any case.
